Does CBO’s Job Loss Projections Mean More Entrepreneurs?

Now that more people can have health insurance without a job, some wonder if the American economy will see an influx of new business owners.

A controversial new Congressional Budget Office report predicts that Obamacare will compel 2 million full-time workers to leave their jobs by 2017 because they can now access affordable health insurance outside the workplace.

An important question: How will this expected job flee affect entrepreneurship?

The CBO report didn’t broach that issue. In fact, it acknowledges that its worker loss projections could be wrong if fewer than 20-some million people sign up for health insurance through the public exchanges.

Research has suggested, however, that Obamacare could indeed lead to a wave of new entrepreneurs. A report published last year by the Robert Wood Johnson Foundation, for example, predicts that Obamacare will lead to 1.5 million more Americans becoming self-employed because they no longer feel tethered to their jobs due to needing health insurance.

If true, that would suggest that a big portion of the 2 million workers projected to leave their jobs will still create economic value through self-employment.

But that’s a controversial projection, too. Scott Shane, an entrepreneurship professor at Case Western Reserve University, said he was “skeptical” of the Robert Wood Johnson report. Many entrepreneurs would also see their health insurance rates rise under Obamacare, making them less likely to want to remain self-employed. “The law doesn’t just affect the decision to become self-employed; it also affects the decision to remain self-employed,” Shane wrote on BusinessWeek.com.

Ultimately it’s probably too soon to know exactly what effect Obamacare will have on entrepreneurial activity. Access to affordable health insurance outside the job market is just one factor. Entrepreneurship and self-employment rates have many other components, including overall economic conditions, employment trends (such as an increasing reliance on independent contractors) and access to capital.

If economic conditions in the United States worsen or markets perform poorly, far fewer people will likely feel confident quitting their jobs or cutting back their hours than predicted—even if they can get health insurance on an exchange.